Prem Singh Vs DCIT (ITAT Chandigarh)
Sale of Land with Old Residential Shed Qualifies for Section 54 Relief – ITAT Chandigarh Allows Indexed Construction Cost, Professional Fees & CGAS Exemption
The Chandigarh Bench of the ITAT partly allowed the assessee’s appeals for AYs 2015-16 and 2017-18 involving computation of long-term capital gains on sale of large parcels of land and denial of deductions u/s 54, indexed construction cost and professional expenses.
For AY 2015-16, the Tribunal held that the assessee had in fact sold land along with an old residential shed of about 2000 sq.ft. constructed between 1982-86. Relying on the valuation report of an approved valuer, government receipts evidencing construction, and the fact that the sale consideration exceeded the collector value, the Tribunal rejected the AO’s presumption that only land was sold. The expression “piece and parcel” in the sale deed was held wide enough to include the existing building. Since the assessee deposited the consideration in the Capital Gains Account Scheme and fulfilled statutory conditions, exemption u/s 54 was allowed and denial of indexed construction cost of ₹54.07 lakhs was reversed.
The Tribunal further held that facilitation fees of ₹45 lakhs and legal consultancy fees of ₹1.25 crores were incurred wholly and exclusively in connection with the transfer and were allowable u/s 48. However, property tax of ₹5.37 lakhs was rightly disallowed as a routine expense not directly linked to transfer.
For AY 2017-18, the ITAT allowed legal and brokerage expenses of ₹80 lakhs and ₹97 lakhs respectively as genuine transfer-related expenditures and deleted the addition of ₹30.63 lakhs made on account of demonetisation cash deposits, holding that sufficient cash balance was available with the assessee. Interest on tax refund was directed to be verified, since the refund and interest were later returned after revision of return.
Accordingly, Section 54 relief, indexed construction cost and major transfer expenses were allowed, and both appeals were partly allowed.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
